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Leases | 6 Months Ended
--- | ---
Jun. 29, 2019
Leases [Abstract] |
Leases | Leases Effective January 1, 2019 the Company adopted ASC 842, which requires recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet, based on the present value of the future minimum rental payments for existing operating leases. The Company adopted the provisions of ASC 842 on January 1, 2019 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment. The Company measures the ROU assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term. As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s credit spread adjusted for current market factors and foreign currency rates. The Company also made a policy election to determine its incremental borrowing rate, at the initial application date, using the total lease term and the total minimum rental payments, as the Company believes this rate is more indicative of the implied financing cost. The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for service centers, warehouses, showrooms, and machinery and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company enters into lease contracts ranging from 1 to 60 years with a majority of the Company’s lease terms ranging from 1 to 8 years. Some leases include one or more options to renew, with renewal terms that can extend the lease term from 3 to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. An insignificant number of our leases include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Certain of our leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of our leases contain residual value guarantees and none of our agreements contain material restrictive covenants. Variable rent expenses consist primarily of maintenance, property taxes and charges based on usage. We rent or sublease certain real estate to third parties. Our sublease portfolio consists mainly of operating leases. The components of lease costs are as follows:
| Three Months Ended June 29, 2019 |  | Six Months Ended June 29, 2019
| Cost of Goods Sold |  | Selling, General and Administrative |  | Total |  | Cost of Goods Sold |  | Selling, General and Administrative |  | Total
Operating lease costs |  |  |  |  |  |  |  |  |  |  |
Fixed | $ | 8,169 |  |  | 22,807 |  |  | 30,976 |  |  | 15,857 |  |  | 47,262 |  |  | 63,119 |
Short-term | 1,552 |  |  | 3,577 |  |  | 5,129 |  |  | 2,991 |  |  | 6,486 |  |  | 9,477 |
Variable | 2,093 |  |  | 9,348 |  |  | 11,441 |  |  | 4,371 |  |  | 14,548 |  |  | 18,919 |
Sub-leases | (41 | ) |  | (151 | ) |  | (192 | ) |  | (125 | ) |  | (284 | ) |  | (409 | )
| 11,773 |  |  | 35,581 |  |  | 47,354 |  |  | 23,094 |  |  | 68,012 |  |  | 91,106 |
Finance lease costs |  |  |  |  |  |  |  |  |  |  |
Amortization of leased assets | — |  |  | 392 |  |  | 392 |  |  | — |  |  | 824 |  |  | 824 |
Interest on lease liabilities | — |  |  | 58 |  |  | 58 |  |  | — |  |  | 89 |  |  | 89 |
| — |  |  | 450 |  |  | 450 |  |  | — |  |  | 913 |  |  | 913 |
Net lease costs | $ | 11,773 |  |  | 36,031 |  |  | 47,804 |  |  | 23,094 |  |  | 68,925 |  |  | 92,019 |
Supplemental balance sheet information related to leases is as follows:
| Classification |  | At June 29, 2019
Assets |  |  |
Operating Leases |  |  |
Right of use operating lease assets | Right of use operating lease assets |  | $ | 343,716 |
Finance Leases |  |  |
Property, plant and equipment, gross | Property, plant and equipment |  | 7,955 |
Accumulated depreciation | Accumulated depreciation |  | (2,838 | )
Property, plant and equipment, net | Property, plant and equipment, net |  | 5,117 |
Total lease assets |  |  | $ | 348,833 |
Liabilities |  |  |
Operating Leases |  |  |
Other current | Current operating lease liabilities |  | $ | 100,345 |
Non-current | Non-current operating lease liabilities |  | 249,844 |
Total operating liabilities |  |  | 350,189 |
Finance Leases |  |  |
Short-term debt | Short-term debt and current portion of long-term debt |  | 1,012 |
Long-term debt | Long-term debt, less current portion |  | 5,014 |
Total finance liabilities |  |  | 6,026 |
Total lease liabilities |  |  | $ | 356,215 |
Maturities of lease liabilities are as follows:
Year ending December 31, | Finance Leases |  | Operating Leases |  | Total
2019 (excluding the six months ended June 29, 2019) | $ | 477 |  |  | 61,429 |  |  | 61,906 |
2020 | 1,034 |  |  | 110,389 |  |  | 111,423 |
2021 | 738 |  |  | 82,494 |  |  | 83,232 |
2022 | 488 |  |  | 55,932 |  |  | 56,420 |
2023 | 418 |  |  | 29,997 |  |  | 30,415 |
Thereafter | 2,930 |  |  | 43,162 |  |  | 46,092 |
Total lease payments | 6,085 |  |  | 383,403 |  |  | 389,488 |
Less imputed interest | 59 |  |  | 33,214 |  |  |
Present value, Total | $ | 6,026 |  |  | 350,189 |  |  |
The Company had approximately $5,151 of leases that commenced after June 29, 2019 that created rights and obligations to the Company. These leases are not included in the above maturity schedule. For additional information regarding the Company’s Commitments and Contingencies as of December 31, 2018 as disclosed for capital and operating leases, see Note 14 in its 2018 Annual Report filed on Form 10-K. Lease term and discount rate are as follows:
| At June 29, 2019
Weighted Average Remaining Lease Term |
Operating Leases | 4.71 years |
Finance Leases | 9.08 years |
Weighted Average Discount Rate |
Operating Leases | 3.3 | %
Finance Leases | 0.9 | %
Supplemental cash flow information related to leases was as follows:
| Six Months Ended
| June 29, 2019
Cash paid for amounts included in measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 63,910 |
Operating cash flows from finance leases | 26 |
Financing cash flows from finance leases | 732 |
Right-of-use assets obtained in exchange for lease obligations: |
Operating Leases | 90,091 |
Finance Leases | 195 |
Amortization: |
Amortization of Right of use operating lease assets (1) | 56,950 |
(1) Amortization of Right of use operating lease assets during the period is reflected in Other assets and prepaid expenses on the Condensed Consolidated Statements of Cash Flows.
Leases | Leases Effective January 1, 2019 the Company adopted ASC 842, which requires recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet, based on the present value of the future minimum rental payments for existing operating leases. The Company adopted the provisions of ASC 842 on January 1, 2019 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment. The Company measures the ROU assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term. As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s credit spread adjusted for current market factors and foreign currency rates. The Company also made a policy election to determine its incremental borrowing rate, at the initial application date, using the total lease term and the total minimum rental payments, as the Company believes this rate is more indicative of the implied financing cost. The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for service centers, warehouses, showrooms, and machinery and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company enters into lease contracts ranging from 1 to 60 years with a majority of the Company’s lease terms ranging from 1 to 8 years. Some leases include one or more options to renew, with renewal terms that can extend the lease term from 3 to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. An insignificant number of our leases include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Certain of our leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of our leases contain residual value guarantees and none of our agreements contain material restrictive covenants. Variable rent expenses consist primarily of maintenance, property taxes and charges based on usage. We rent or sublease certain real estate to third parties. Our sublease portfolio consists mainly of operating leases. The components of lease costs are as follows:
| Three Months Ended June 29, 2019 |  | Six Months Ended June 29, 2019
| Cost of Goods Sold |  | Selling, General and Administrative |  | Total |  | Cost of Goods Sold |  | Selling, General and Administrative |  | Total
Operating lease costs |  |  |  |  |  |  |  |  |  |  |
Fixed | $ | 8,169 |  |  | 22,807 |  |  | 30,976 |  |  | 15,857 |  |  | 47,262 |  |  | 63,119 |
Short-term | 1,552 |  |  | 3,577 |  |  | 5,129 |  |  | 2,991 |  |  | 6,486 |  |  | 9,477 |
Variable | 2,093 |  |  | 9,348 |  |  | 11,441 |  |  | 4,371 |  |  | 14,548 |  |  | 18,919 |
Sub-leases | (41 | ) |  | (151 | ) |  | (192 | ) |  | (125 | ) |  | (284 | ) |  | (409 | )
| 11,773 |  |  | 35,581 |  |  | 47,354 |  |  | 23,094 |  |  | 68,012 |  |  | 91,106 |
Finance lease costs |  |  |  |  |  |  |  |  |  |  |
Amortization of leased assets | — |  |  | 392 |  |  | 392 |  |  | — |  |  | 824 |  |  | 824 |
Interest on lease liabilities | — |  |  | 58 |  |  | 58 |  |  | — |  |  | 89 |  |  | 89 |
| — |  |  | 450 |  |  | 450 |  |  | — |  |  | 913 |  |  | 913 |
Net lease costs | $ | 11,773 |  |  | 36,031 |  |  | 47,804 |  |  | 23,094 |  |  | 68,925 |  |  | 92,019 |
Supplemental balance sheet information related to leases is as follows:
| Classification |  | At June 29, 2019
Assets |  |  |
Operating Leases |  |  |
Right of use operating lease assets | Right of use operating lease assets |  | $ | 343,716 |
Finance Leases |  |  |
Property, plant and equipment, gross | Property, plant and equipment |  | 7,955 |
Accumulated depreciation | Accumulated depreciation |  | (2,838 | )
Property, plant and equipment, net | Property, plant and equipment, net |  | 5,117 |
Total lease assets |  |  | $ | 348,833 |
Liabilities |  |  |
Operating Leases |  |  |
Other current | Current operating lease liabilities |  | $ | 100,345 |
Non-current | Non-current operating lease liabilities |  | 249,844 |
Total operating liabilities |  |  | 350,189 |
Finance Leases |  |  |
Short-term debt | Short-term debt and current portion of long-term debt |  | 1,012 |
Long-term debt | Long-term debt, less current portion |  | 5,014 |
Total finance liabilities |  |  | 6,026 |
Total lease liabilities |  |  | $ | 356,215 |
Maturities of lease liabilities are as follows:
Year ending December 31, | Finance Leases |  | Operating Leases |  | Total
2019 (excluding the six months ended June 29, 2019) | $ | 477 |  |  | 61,429 |  |  | 61,906 |
2020 | 1,034 |  |  | 110,389 |  |  | 111,423 |
2021 | 738 |  |  | 82,494 |  |  | 83,232 |
2022 | 488 |  |  | 55,932 |  |  | 56,420 |
2023 | 418 |  |  | 29,997 |  |  | 30,415 |
Thereafter | 2,930 |  |  | 43,162 |  |  | 46,092 |
Total lease payments | 6,085 |  |  | 383,403 |  |  | 389,488 |
Less imputed interest | 59 |  |  | 33,214 |  |  |
Present value, Total | $ | 6,026 |  |  | 350,189 |  |  |
The Company had approximately $5,151 of leases that commenced after June 29, 2019 that created rights and obligations to the Company. These leases are not included in the above maturity schedule. For additional information regarding the Company’s Commitments and Contingencies as of December 31, 2018 as disclosed for capital and operating leases, see Note 14 in its 2018 Annual Report filed on Form 10-K. Lease term and discount rate are as follows:
| At June 29, 2019
Weighted Average Remaining Lease Term |
Operating Leases | 4.71 years |
Finance Leases | 9.08 years |
Weighted Average Discount Rate |
Operating Leases | 3.3 | %
Finance Leases | 0.9 | %
Supplemental cash flow information related to leases was as follows:
| Six Months Ended
| June 29, 2019
Cash paid for amounts included in measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 63,910 |
Operating cash flows from finance leases | 26 |
Financing cash flows from finance leases | 732 |
Right-of-use assets obtained in exchange for lease obligations: |
Operating Leases | 90,091 |
Finance Leases | 195 |
Amortization: |
Amortization of Right of use operating lease assets (1) | 56,950 |
(1) Amortization of Right of use operating lease assets during the period is reflected in Other assets and prepaid expenses on the Condensed Consolidated Statements of Cash Flows.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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